Statsguru: New schemes to boost EV adoption, align with climate goals

Two schemes approved by the Union Cabinet last week intend to hasten adoption and increase electric vehicle (EV) penetration in India, to ultimately align with the country’s climate change goals.

The schemes, PM Electric Drive Revolution in Innovation Vehicle Enhancement (PM E-DRIVE) and PM-eBus Sewa-Payment Security Mechanism (PSM) will replace existing EV subsidy schemes.

The number of EVs sold each year has seen an uptick, touching a high of 1.7 million units in FY24, but the pace of its growth has slowed down. EV sales grew at a compound annual growth rate of 181 per cent in the five years ended FY19 and by 76 per cent in the five years after (chart 1).

Meanwhile, the sale of petrol and diesel vehicles has decelerated between FY20 and FY24.

India’s EV30@30 roadmap aims for a 30 per cent EV share in sales in the next 6 years. EVs accounted for about 7 per cent of all the vehicles sold in FY24 compared to under 1 per cent a decade ago. Considering this increase in EV penetration, the government has lowered the incentives offered in the new schemes. The schemes do not cover e-cars.

Industry research done by CRISIL has previously shown better EV adoption in countries like China and Norway due to tax incentives and demand subsidies. EV subsidies in India were higher than in the UK, the US, and Germany according to the CRISIL report (chart 2).

Just 11 states had a better EV adoption ratio than the national figure. But none was close to the 30 per cent mark (chart 3). 

Consumer interest, government push, growing environment consciousness, and lowering production costs, among other reasons, have led to more players in the segment— from 124 in FY15 to over 700 in FY24.

While India’s EV industry is still reliant on lithium-ion battery imports, the costliest component of an EV, domestic manufacturing has seen some uptick (chart 4).

However, India imported over 370,000 units of EVs ( two-wheelers and four-wheelers) in the last five years, with imports peaking in 2021, despite having the highest import tariffs on EVs globally (chart 5, 6).

 

Import duties on EVs were slashed to 15 per cent earlier this year.